Lisa Lokasto

Revenue has recently provided an update on its banking modernisation programme, which includes important changes to how VAT liabilities are paid.

As part of this transition, the Fixed Direct Debit (FDD) option for VAT is being phased out. FDD was an arrangement where the taxpayer paid a fixed monthly amount towards their VAT liability. That amount was agreed with Revenue in advance.

At the end of the year, when the Annual VAT3 return was filed, the total liability was compared with what had been paid through the FDD. It was a bit like a VAT payment on account each month and a balancing up once a year when the annual VAT3 was filed.

Annual VAT3s will remain only for very small traders approved by Revenue (annual liability under €3,000).

whats changing

This option is being phased out, which in practical terms means a transition to bi-monthly VAT3 reporting.

THE FIRST BI-MONTHLY RETURNS

The first cohort going through this transition are effectively those with June FDD year-ends. Revenue is phasing out FDD because of its banking modernisation project. Instead, taxpayers are being moved to bi-monthly VAT returns and payments (the standard system), and they will need to pay their actual VAT due every two months.

For these companies;

The last annual VAT3 return was to June 2025, filed 23 July 2025

Their annual FDD cycle is now closed,

They’re being moved onto the bi-monthly VAT cycle,

Their first bi-monthly VAT return is for July–August, due 23 September 2025.

They can move to variable DDs if they wish. With VDD, Revenue automatically collects the exact amount of VAT due when you file your return. There’s no requirement to use VDD. The bi-monthly VAT3s can be paid by RDI/manual payment as per normal.

Small

FINAL WORD

Taxpayers moving from FDD to bi-monthly VAT should ensure their July–August VAT3 is filed and paid on time next week. Setting up a VDD may be the most convenient way to manage payments, but bank/card payments remain available.

If you are unsure how these changes affect you, or if you’d like support with setting up VDD or meeting your VAT filing obligations, get in touch. We’ll be happy to guide you through the transition and make sure you stay compliant.

-Lisa